With plans for a rapid roll-out of its actively managed exchange-traded fund (ETF) strategies in Europe and the UK by the end of the year, the first acquisition for Cathie Wood's Ark Invest is a potentially significant moment for the European fund market.
However, some analysts questioned whether her high US profile would follow her across the Atlantic, where she is less well known.
What's the deal?
Wood, who is the founder, chief executive officer, chief investment officer and chief Bloomberg and CNBC talking head of the Florida-headquartered firm, struck a deal to buy a 70% stake in Rize for just over £2.6 million up-front, potentially rising to £10.5 million (US$13 million).
The seller of the stake, London-listed AssetCo (AIM:ASTO), which itself bought into Rize just over two years ago for £16.5 million, as part of the deal will have a number of its River & Mercantile ETFs launched on the Ark-backed platform.
The US company said the deal finally allows it to market funds to investors in Europe, the UK and potentially other markets.
It boasted that its funds "should stand out in the European market where few, if any, products of their caliber exist, especially in an ETF format".
What does Wood plan to do with Rize?
The plans include changing the Rize name to Ark Invest Europe, with the European product range due to expand from the current 11 thematic ETFs which all have a strong sustainability focus, with the launch of its actively managed UCITS ETFs across Europe "as soon as possible".
“We’ve been asked for years, almost since we began the firm, when we were coming to Europe,“ said Wood in a Q&A on the company's website. “And with this acquisition Ark Invest Europe will roll out in the next few months.”
Watch this ETF space
While Wood is a frequent talking head on investment channels such as CNBC and Bloomberg TV, the deal is partly a test of whether she and her company have broken through into the consciousness of European retail investors.
“The value of this transaction is relatively small, but its significance is greater than the dollar signs on the deal,” said Laith Khalaf, head of investment analysis at investment platform AJ Bell.
“That’s because this marks the entry of Ark into the European ETF market, with plans to sell both active and index ETFs in the thematic space.”
Peter Sleep, senior investment manager at 7IM said he was "not sure that Cathie Wood is well known by European retail, but she is good with media and she may help raise the awareness of ETFs.
"How long she remains in the spotlight will depend on the long-term performance of her products. It is possible to paint positive and negative scenarios. Whatever happens I am sure the media industry is happy."
The flagship ARK Innovation ETF rewarded investors with massive growth during the pandemic, catapulting Wood into guru status and bringing the concept of actively managed passive funds into the wider public eye, before the fund tumbled sharply back down last year to roughly where it started.
After these few years of “poor performance”, Khalaf said it will be interesting to see the demand for Ark products in Europe and the UK.
“Ark now has a foot in the European door, but it still has work to do to persuade fund buyers they need exposure to their specialist, high octane fund range,” he said.
Sleep said Ark committing capital by buying Rize rather than using one of the existing white label providers to enter Europe "suggests she has a good deal of confidence that the risk-reward is better with Rize".
He noted that the barriers to enter the ETF market are fairly low and the ETF industry "is used to new entrants popping up all the time.
"Cathie Wood is very media savvy. I am sure the European ETF industry will welcome her if she can help raise the awareness of ETFs in Europe."
Rize's ETF range
Of its 11 thematic ETFs, currently the largest are the Rize Sustainable Future of Food UCITS ETF at US$177 million assets under management, Rize Cybersecurity and Data Privacy UCITS ETF at US$116.2 million AUM and Rize Environmental Impact 100 UCITS ETF at US$89.9 million.
Rize Medical Cannabis and Life Sciences UCITS ETF has US$16.8 million of AUM and Rize Digital Payments Economy UCITS ETF has US$11 million AUM but the others are all smaller than US$10 million.
The Cybersecurity and Medial Cannabis ETFs were the first two funds launched by Rize, showing off its version of active management, called "dynamic exposure" to an investment theme, meaning the basket of stocks it buys and sells is constantly evolving along with the market.
All are categorised as being compliant with European SFDR sustainability Articles 8 or 9, domiciled in Dublin and distributed throughout Europe.